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Audit (A-07-09-00299)

Review of Termination Claim for Postretirement Benefit Costs Made by CareFirst of Maryland, Incorporated

Executive Summary

CareFirst of Maryland, Incorporated's (CareFirst) entire termination claim of $1.5 million for postretirement benefit (PRB) costs was unallowable for Medicare reimbursement. On December 31, 1994, CareFirst's Medicare Part B contractual relationship was terminated, and on September 30, 2005, its Medicare Part A contractual relationship was terminated. On November 25, 2008, CareFirst submitted a termination claim of $1.5 million to seek reimbursement for future PRB costs that CareFirst had not incurred prior to the termination of the Medicare contracts.

CareFirst based its termination claim for PRB costs on a retroactive change in accounting practice without Centers for Medicare & Medicaid Services approval. Therefore, and pursuant to CareFirst's Medicare contracts, none of the costs claimed were allowable for Medicare reimbursement.

We recommended that CareFirst withdraw its termination claim of $1.5 million for PRB costs associated with Medicare Part A and B contracts. CareFirst disagreed with our recommendation. After reviewing CareFirst's comments, we maintain that CareFirst should withdraw the full claim amount.

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